John Hasse and Michael Ontko, Rowan University

Impervious Cap & Trade: A Conceptual Framework1

Hasse & Ontko

Integrating Environmental Management, Regional Planning, TDR and LEED-ND through Impervious Surface Cap and Trade: A Conceptual Framework

John Hasse and Michael Ontko, Rowan University

Abstract – This paper proposes a conceptual framework for aninnovative approach to Transferable Development Rights (TDR) that utilizes an impervious surface cap and trade system to better integrate environmental management with smart growth and sustainability land planning objectives. It utilizes the State of New Jersey as the testing ground for developing the concept since the state has excessive growth pressures as well as a long record of experimenting with land management initiatives, some more successful than others. The paper puts the proposed system in the context of New Jersey’s existing land management toolbox. The concept is designed not to replace existing land management programs, but to instead provide an overlay mechanism that discourages development in rural and environmentally sensitive areas while fosteringsmart growth that achieves LEED-ND certification and redevelopment of already urbanized areas. It is envisioned that such an Impervious Cap andTrade (ICT) system would improve the land management process in the following ways: 1) limiting total impervious surface in remaining open lands to justifiable limits, 2) encouraging the redevelopment of urbanized areas by exempting redevelopment of already existing impervious surface from the new restriction, 3) allowing market mechanisms to pay for open space preservation and thus keeping pace with increasing land values, 4) rewarding development and redevelopment proposals that demonstrate substantive smart growth goals of the NJ State Plan and sustainability performance as evaluated by LEED-ND, 5) allowing flexibility and market changes to occur while still maintaining thresholds of environmental standards and objectives, and 6) allowing a substantial amount of local control to remain in the process. In essence, the concept is a unifying overlay that provides a mechanism for the NJ State Plan goals of smart growth, sustainability and environmental management to be actualized through a flexible, market-based impervious surface cap and trade. The paper concludes with an agenda of how impervious cap and trade might be initiated and adopted in New Jersey and in other jurisdictions.

1)Introduction –

Why does New Jersey need yet another land management mechanism? The Garden State has been on the forefront of innovating land management initiatives for decades. It was one of the earliest states to develop a state-wide office of planning and an accompanying state plan. It has a highly effective management plan for the Pinelands region of southern New Jersey encompassing over one million acres of land (20% of the state's territory). It has recently enacted a regional plan for the Highlands region of northern New Jersey. New Jersey has a strong Department of Environmental Protection with some of the mostrigorous wetlands and storm water regulatory procedures in the United States. It also has one of the most active and successful farmland & open space preservation programs in the nation. Furthermore, it has set national precedents for affordable housing planning policy. With all these programs in place, why propose an impervious surface transfer of development rights (TDR) system? As the old truism goes, “if you keep doing what you’ve been doing, you’ll keep getting what you’ve got”.

In spite of all the innovative and honorable land management initiatives, the Garden State is still urbanizing in a pattern that is environmentally degrading, socially divisive and fundamentally unsustainable (Figure 1). There are some major gaps in policy that are preventing the state from reaching its full potential for fostering smart growth and creating a sustainable land management system. Important land resources such as prime farmland, wetlands, and forests continue to be lost at an unsustainable rate. Cities still suffer from disinvestment and neglect, while development of greenfields (undeveloped open land) continues to be more economically attractive to developers than infill and redevelopment. Open space preservation is becomingincreasinglyexpensive, while acquiringpublic funding to pay for the open space is growing more difficult. Home rule continues to fosterdevelopment decisions driven by short-term factors such as maintaining high property values and attracting taxratables rather than regional coordination and long term sustainability objectives. Land development patternsremain scattered, land consumptive, and low-density, causing environmental and social problems while exacerbating the state’s prospects for addressing climate change.

Figure 1.New Jersey is one of the most rapidly urbanizing states in the United States of America, and much of the development is scattered, low density and single use (i.e. sprawl). At current development rates the state will reach buildout by the middle of this century. Photo: J. Hasse.

The limitations of New Jersey’s existing land management system for averting sprawl are made clear by examining recent development patterns. A recent report looking at the detailed land use change patterns in New Jersey (Hasse and Lathrop, 2008) found that the state urbanized 239,960 acres of greenfields during the 16 year period between 1986 and 2002 with an average rate of over 15,000 acres per year. This rate of urbanization puts the Garden State on track to becoming the first state in the U.S. to reach buildout sometime in the middle of the century(Hasse and Lathrop, 2001).

The study looked further into detailed characteristics of the greenfields conversion and concluded that urbanization patterns became more sprawling over the study period. Low-density rural residential housing (greater than ½ acre lots) consumed 67% of the open space that was converted to residential land use while providing housing for only 24% of the population entering new housing. Conversely, the proportion of land that went into higher-density multi-family units decreased during the study period from 9.4% of the pre-1986 residential land acreage to 5.6% of land developed between 1995 and 2002 (Hasse & Lathrop, 2008).

Furthermore, the patterns of new urbanization became more dispersed and fragmented. The average size of development tracts decreased while the annual number of individual developed tracts increased. At the same time, the location of much of the low-density development that consumed greenfield land was in the New Jersey State Plan’s environmentally sensitive and rural planning areas. Meanwhile, many of New Jersey’s inner cities such as Camden and Newark continued to experience extreme social stress related to disinvestment, concentrated poverty and flight of the middle class population to the sprawling outer-ring suburb(Evans, 2004). During the 1990 – 2000 census the statewide population increased by 8.9% to 8.4 million, but at the same time 145 municipalities, generally in the older inner-ring core areas, actually lost population to the rapidly growing suburban municipalities.

The geographic, economic, historical and political circumstances of the statemake it very difficult for New Jersey to achieve the goals of smart growth and sustainability under the state’s current set of land regulatory mechanisms. Barring complete economic collapse, New Jersey will reach buildout within the next several decades. The socioeconomic and ecological implications of that buildout landscape are far-reaching. A big game-changing idea is needed if the Garden State hopes to change its land development trajectory.

2)Need for a Big New Idea in New Jersey

We proposed that the pending buildout of the state warrants a buildout approach to planning and land management. In this light we suggest that there are two possible future land use scenarios for New Jersey. The first scenario continues recent trends of growth over the past several decades. Development patterns will continue to be driven by the prevalent economic and political forces and guided by the current mosaic of land management policies. Under this first scenario the remaining available lands will be developed in a manner consistent with current zoning ordinances, but poorly coordinated across municipalities. Much of the future development that will occur under scenario one will fail to achieve the smart growth goals of the New Jersey State Plan and measures of sustainability since there are few mechanisms under the current system for the actualization of these goals in the development process. Additional open space preservation will become increasingly difficult to acquire as land becomes scarcer and property values rise accordingly. Significant amounts of remaining prime farmland, wildlife habitat, aquifer recharge areas, forests and important land resources will be lost. New Jersey’s older towns and urbanized areas will continue to struggle for revitalization and to retaina middle class tax base, while suburbanizing rural municipalities will continue to grow at rapid rates, stressing school, infrastructure and road network capacities and consuming large amounts of land. Under scenario one, the state develops in a manner similar to what it has experiencedover pastseveral decades until land runs out. The final landscape of New Jersey under scenario one will be substantially diminished in its ecological and socioeconomic function compared to its current state.

The second scenario envisions a future New Jersey landscape in which development growth occurs in a manner that accomplishes the smart growth goals of the State Plan and that achieves meaningful measures of sustainability. Scenario two significantly slows development of remaining greenfields and encourages reinvestment and redevelopment of New Jersey’s already urbanized areas. It encourages the development of high quality neighborhoods that foster community. In this scenario the development industry thrives economically on building and redeveloping sustainable development in collaboration with environmental stakeholders. Scenario two provides for the preservation of the most vital open spaces and natural resources so that the integrity of wildlife habitat, water quality, ground water recharge, forest and agricultural lands can be maintained. Under scenario two, New Jersey will accomplish its maximum potential for designing and achieving the highest level of integrity for the ecological and socioeconomic function of its land systems, whilemaintaining and even enhancing themfrom theircurrent state.

Scenarios one and tworespectively represent worst case and best case outcomes for New Jersey’s future development. In order to shift development patterns from scenario one (trend) to scenario two (smart growth and sustainability), there needs to be a game-changing shift in policy. We argue that such a new land management initiative is called for to specifically address a number of unmet needs.

First, there is a vital need for additional open space preservation that fills in many significant gaps and vulnerabilities in open space protection goals. For example, the Garden State Greenways project (GSG, 2009) identified over onemillion acres of lands that needed to be protected in order to create a system of open space hubs and corridor networks that maintain ecosystem and recreational functional integrity. Reports such as the State Comprehensive Outdoor Recreation Plan (SCORP) identify a need to preserve 700,000 additional acres of high value natural resource lands statewide to protect ground water resources, flood prone areas and other habitats and environmentally sensitive areas (NJDEP SCORP, 2007). The State Agriculture Development Committee (SADC) estimates that in order to ensure a viable long-term agricultural industry, an additional 450,000 acres of land should be put into preservation (SADC 2009). New Jersey’s climate change mitigation efforts will require the increase of forest lands and wetlandsfor carbon sequestration in order to meet its carbon reduction goals (State of NJ Global Warming, 2008).The value of New Jersey’s remaining open lands for the ecosystem services they provide are estimated to be worth, at a minimum, $11.6-19.4 billion/year (Costanza et al., 2007). These services will be diminished at significant cost to the state if development patterns continue to consume open space and follow the sprawling trends of the past several decades.

As these reports document, there is yet still a huge need for additional open space preservation to achieve the sustainability goals of the state. However, the prospects of acquiring the needed open space with the old models of public funding will continually diminish. As more and more land in New Jersey becomes developed or preserved, the remaining available land becomes increasingly expensive as dictated by basic supply and demand economics. Currently 81% of requests for NJ DEP Green Acres funding grants remain unfunded (Ruga 2009). Future requests for open space preservation will grow increasingly more difficult to fund especially during a period of economic uncertainty. A new means of accomplishing open space preservation is needed that can keep up with the rising costs of land while at the same time lessening the tax burden on the public to purchase the open space.

In addition to a different approach to open space preservation, the second need is to develop a better mechanism for guiding future development so that it demonstrably achieves the smart growth goals of the State Plan and meaningful measures of sustainability. Such a mechanism should result in development patterns that: 1) provide high-quality of life communities; 2)provide a unique identity and sense of place; 3)are safe andhealthy; 4) are fiscally sound; 5)accomplish the goal of the NJ State Plan; and 6)conserve energy andresources.

The third need isfor a better mechanism of protectingnatural lands and restoringecosystem functional vitality across scales. This includes the ecological function of land for the following purposes: 1) water quality, including surface quality, ground water quality and flood control; 2) wildlife habitat wildlife movement corridors; 3) agricultural land protection, including prime agricultural soils; and 5) addressing climate change through the carbon sequestration function of forests, wetlands preservation, local food/fiber production, and compact settlement patterns that reduce VMT.

The fourth need for New Jersey to realize scenario two for smart growth and sustainability is for a mechanism that makes redevelopment of existing developed lands more fiscally attractive than development of greenfields. Redevelopment is only likely to occur if it can be made as profitable as or more profitable than greenfield development.

The fifth need isfor any new land management mechanism is to realistically Integrate with New Jersey’s existing land management system including: 1) the New Jersey Municipal Land Use Law; 2) home rule zoning control of the municipality; 3) the regulatory authority of the NJ DEP; 4) smart growth goals proscribed in the State Plan; and 5) regional planning authorities such as the Pinelands, Meadowlands and Highlands management plans. A new planning initiative that appears to usurp regulatory stakeholder interests simply won’t pass politically, no matter how visionary it may be.

The sixth need for developing a land management mechanism that guides the Garden State to the smart growth and sustainable vision of scenario two is that it must be acceptable to a multitude of New Jersey stakeholders. Theseinclude prospective homebuyers, home builders and the real estate industry, environmental watch groups, housing and social justice advocates,farmers and rural land holders and many others. If any stakeholder feels that a new land management mechanism is unfair to their interests, then the prospects of success will be diminished. In order for a new land use management mechanism to be successful, each of these six needs outlined above must be adequately addressed.

3)Of What Cloth do we make this Big New Idea?

Creating a newland use mechanism that fulfills the needs outlined above is no small task. Rather than reinvent New Jersey’s land management system from scratch, we pull together a number ofalready existing ideas of land use management and combine them to create an overlay system for sustainable land management. We draw onTransfer of Development Rights (TDR), impervious surface regulations, smart growth principles of the New Jersey State Plan and the LEED-NDsustainable building evaluation systemsdeveloped by the US Green Building Council. We integrate all these components through an Impervious Cap and Trade (ICT) program that would regulate and limit the creation of new impervious surfaces, allowing purchase and selling of impervious credits. The program is arranged into a regulatory framework that overlays New Jersey’s existing land regulation system. Each of these elements is outlined below.

Transfer of Development Rights

Transfer of Development Rights is a land use mechanism that aims to cluster development in certain areas at increased density, while leaving other areas undeveloped yet able to receive an economic share of the compensation for the development. In essence, the right to development is severed from the property parcel and allowed to be moved to another parcel. The parcel that sells its development rights is then deed-restricted from future development. The concept has its roots in the 1916 New York City zoning ordinance (the nation’s first zoning code), which allowed owners to sell unused air rights on one parcel to an adjacent parcel that could then exceed the zoning height limitations. During the 1970s, TDR developed into an approach for growth control and open space preservation. The constitutionality of TDR was first tested and upheld in the US Supreme Court in 1978 in Penn Central Transportation Co. v. New York City and revisited in 1997 in Suitum v. Tahoe Regional Planning Agency. The New Jersey supreme court upheld TDR within the state in 1991 in Gardner v. New Jersey Pinelands Commission(Beetle, 2002).